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By Iain Withers and Lawrence White
LONDON, Oct 30 (Reuters) - NatWest reported better
than expected third quarter profit as COVID-19-linked provisions
for bad loans dwindled, but it warned tougher times lie ahead as
fresh social and economic restrictions to curb the pandemic
begin to bite.
The bank posted a 355 million pound ($462.67 million)
pre-tax profit for the July-September period, compared to a 75
million pound loss in an average of analyst forecasts.
NatWest booked a further 254 million pounds provision for
expected bad loans - less than half the 628 million pounds
forecast - and said provisions for the year would be at the
lower end of a 3.5-4.5 billion pound range previously given.
Rivals Lloyds, HSBC and Barclays
also set aside smaller provisions in their third quarter
earnings compared to earlier in the year, as government
financial support measures delay some economic pain to next
year.
Despite the improved picture, UK banks are still under huge
pressure with the total financial toll of the pandemic still
unclear and from rock-bottom central bank interest rates.
NatWest's market value on the London stock exchange has
halved this year due to the torrid outlook, with rival Lloyds
falling by a similar amount.
"Challenging times lie ahead, especially as the current
government support schemes come to an end and as new COVID-19
related restrictions are introduced," said NatWest Chief
Executive Alison Rose.
The quarterly profit for NatWest came despite a 324 million
pound charge for buying back its own debt, as it redeemed some
bonds set to lose their regulatory capital benefits and
therefore become too expensive, the bank said.
NatWest's net interest margin - the difference between the
money it makes on lending and pays out on deposits - came under
further pressure in the quarter, falling two basis points to
1.65% compared to the previous quarter.
The bank had plunged into the red in the first half of this
year on a 2.9 billion pound provision against potential loan
losses.
NatWest remains 62% owned by taxpayers following its bailout
in the 2008-09 financial crisis.
Despite pressure on profits across the industry, NatWest
strengthened its core capital ratio - a key measure of financial
strength - further to 18.2%, up from 17.2% previously.
Before the pandemic the bank had been stockpiling capital to
give it the firepower to buy back government-owned shares, but a
fall in bank stocks since the crisis has delayed this plan.
($1 = 0.7673 pounds)
(Reporting by Iain Withers and Lawrence White, editing by
Rachel Armstrong and Jon Boyle)
